Moving to portugal and Brexit...
Apr 8th 2017, 7:48 am
#46
Forum Regular
Thread Starter
Joined: Apr 2017
Posts: 40
Re: Moving to portugal and Brexit...
Thanks guys
So Liveaboad. You think I should try and get some advice from someone in the UK regarding this matter? It would be nice if I could find some professional advice from someone who could shed light on everything regarding my particular situation when moving to portugal.
Red eric, thanks for clarifying. It seemed in other threads people were saying it wasnt all that easy to get accepted for the NHR scheme. If you can do it, I am guessing its definitely worth it, as it only has advantages, no drawbacks from what I can see?
So Liveaboad. You think I should try and get some advice from someone in the UK regarding this matter? It would be nice if I could find some professional advice from someone who could shed light on everything regarding my particular situation when moving to portugal.
Red eric, thanks for clarifying. It seemed in other threads people were saying it wasnt all that easy to get accepted for the NHR scheme. If you can do it, I am guessing its definitely worth it, as it only has advantages, no drawbacks from what I can see?
Apr 8th 2017, 7:58 am
#47
Polished expat
Joined: Jul 2014
Location: Arcos de Valdevez "Onde Portugal se fez"
Posts: 16,831
Re: Moving to portugal and Brexit...
Or have you opted for a special lower tax regime on that property rental which doesn't allow englobamento, as it's known?
It's my understanding that the dual tax treaties are bilateral; as my rental properties are not in the UK, my experiance likely has no bearing.
Having said that, I was told that if my income were taxed where it is, I would not pay tax on that income in Portugal; regardless of the amount. Even if I paid zero!
Having said that, I was told that if my income were taxed where it is, I would not pay tax on that income in Portugal; regardless of the amount. Even if I paid zero!
That might, I suppose, be a question worth asking on a separate thread. There must be some UK landlords who are resident in PT and who declare their income to the PT authorities on the forum, surely?
They might not be reading this thread though, so one with a more relevant title might catch their eye.
Apr 8th 2017, 8:07 am
#48
Forum Regular
Thread Starter
Joined: Apr 2017
Posts: 40
Re: Moving to portugal and Brexit...
yeah I would be very interested to know. it seems a bit mad that you could get taxed in the UK and portugal for one source of income.
Maybe I shouldnt ask these kinds of questions, but if I am paying tax in the UK for my property, do I even need to declare that in Portugal? Surely if you didnt research this like I am, most would assume that as rental income is taxed in the home country, that you would not have to do anything about it in Portugal? Maybe people can't respond to a bit of a 'grey' question like this! If so, don't worry
I am also confused from you guys have said....if I end up not having to pay tax in the UK due to the 11k allowance, then does that mean I dont need to pay tax anywhere? Is it only if I have to pay tax in the UK that it may also be required in PT, or maybe they are completely seperate
Sorry i feel like Im going round in circles a bit!
Maybe I shouldnt ask these kinds of questions, but if I am paying tax in the UK for my property, do I even need to declare that in Portugal? Surely if you didnt research this like I am, most would assume that as rental income is taxed in the home country, that you would not have to do anything about it in Portugal? Maybe people can't respond to a bit of a 'grey' question like this! If so, don't worry
I am also confused from you guys have said....if I end up not having to pay tax in the UK due to the 11k allowance, then does that mean I dont need to pay tax anywhere? Is it only if I have to pay tax in the UK that it may also be required in PT, or maybe they are completely seperate
Sorry i feel like Im going round in circles a bit!
Apr 8th 2017, 8:10 am
#49
Polished expat
Joined: Jul 2014
Location: Arcos de Valdevez "Onde Portugal se fez"
Posts: 16,831
Re: Moving to portugal and Brexit...
With regard to ease of application, there are mixed reviews. This one says an accountant's a waste of money http://britishexpats.com/forum/portu.../#post12194377
Apr 8th 2017, 8:17 am
#50
Forum Regular
Thread Starter
Joined: Apr 2017
Posts: 40
Re: Moving to portugal and Brexit...
Thanks red eric
Well who knows what will happen in 10 years, best to take advantage of it if I'm able.
There is a big possibility for some time I would be living only off my rental income from the UK, hopefully whilst studying Portuguese full time somewhere, at University possibly (if I can find a course!).
So if it turns out I only need to pay tax in the UK, then there will be no need for an accountant in PT, as I wont have anything to declare. But I am a novice at all things tax related, and generally a bit averse to complicated money and tax matters. Surely most people are? Yet some people are accountants!
Well who knows what will happen in 10 years, best to take advantage of it if I'm able.
There is a big possibility for some time I would be living only off my rental income from the UK, hopefully whilst studying Portuguese full time somewhere, at University possibly (if I can find a course!).
So if it turns out I only need to pay tax in the UK, then there will be no need for an accountant in PT, as I wont have anything to declare. But I am a novice at all things tax related, and generally a bit averse to complicated money and tax matters. Surely most people are? Yet some people are accountants!
Apr 8th 2017, 8:48 am
#51
Polished expat
Joined: Jul 2014
Location: Arcos de Valdevez "Onde Portugal se fez"
Posts: 16,831
Re: Moving to portugal and Brexit...
Maybe I shouldnt ask these kinds of questions, but if I am paying tax in the UK for my property, do I even need to declare that in Portugal? Surely if you didnt research this like I am, most would assume that as rental income is taxed in the home country, that you would not have to do anything about it in Portugal? Maybe people can't respond to a bit of a 'grey' question like this! If so, don't worry
I don't know how sophisiticated they are here about weeding out non-declarers - if I were in charge, I might be looking at investigating a sample of people who have a fiscal number, are marked as resident but don't complete a tax return.
The other thing is there's a certain amount (and increasing) of information exchange between the member states. Bank interest, for example, was one of the things which became much more visible across the EU just last year with the implementation of new regulations / agreements.
I am also confused from you guys have said....if I end up not having to pay tax in the UK due to the 11k allowance, then does that mean I dont need to pay tax anywhere? Is it only if I have to pay tax in the UK that it may also be required in PT, or maybe they are completely seperate
Sorry i feel like Im going round in circles a bit!
Sorry i feel like Im going round in circles a bit!
So if it turns out I only need to pay tax in the UK, then there will be no need for an accountant in PT, as I wont have anything to declare. But I am a novice at all things tax related, and generally a bit averse to complicated money and tax matters. Surely most people are? Yet some people are accountants!
And even if the income were only taxable by the UK authorities, you ought still to fill out the tax return because once you have income over a certain threshold, it is your obligation to inform the authorities here of it, whether or not they can tax it.
Apr 8th 2017, 9:32 am
#52
Forum Regular
Thread Starter
Joined: Apr 2017
Posts: 40
Re: Moving to portugal and Brexit...
Hi Rederic, thanks again for the info
Yes you are right, best to declare and keep things above board!
It seems odd to me that even if I do not have to pay tax in the UK due to the allowance, I would then have to pay it in PT. So what you are saying is that if I dont have to pay any tax in the UK due to the 11k allowance, I will have to pay full PT tax on that income, taking in to account whatever the PT tax allowance it? (what is the portugal tax allowance?) That would be very annoying!!
I probably need to find some professional advice too just to be sure. I am unsure whether this should be from a Portuguese company, UK or international.
You're all being very helpful!
Yes you are right, best to declare and keep things above board!
It seems odd to me that even if I do not have to pay tax in the UK due to the allowance, I would then have to pay it in PT. So what you are saying is that if I dont have to pay any tax in the UK due to the 11k allowance, I will have to pay full PT tax on that income, taking in to account whatever the PT tax allowance it? (what is the portugal tax allowance?) That would be very annoying!!
I probably need to find some professional advice too just to be sure. I am unsure whether this should be from a Portuguese company, UK or international.
You're all being very helpful!
Apr 8th 2017, 9:41 am
#53
BE Forum Addict
Joined: Jul 2009
Posts: 1,837
Re: Moving to portugal and Brexit...
... Sorry to confuse you - I'm talking hypothetically as I don't know with absolute certainty. But the UK personal allowance probably won't be relevant with regard to whether you're liable for tax on that income in Portugal if (as I suspect) PT is entitled to tax it, too. The agreement between the 2 countries, if I'm reading it correctly, is simply that PT would reduce their claim on it by the amount of tax already paid in the UK. If none, then you pay the full PT tax, if you paid £250 in the UK it would be deducted from the PT bill etc. ...
Apr 8th 2017, 1:01 pm
#54
BE Forum Addict
Joined: Jun 2012
Posts: 3,033
Re: Moving to portugal and Brexit...
For my Netherlands based property rental, I am not taxed in Holland, as they do not tax residential rental income there.
As it is NOT taxed, Portuguese tax law applies; no, I have no options or get outs. The only possibility in my case is to get the Dutch to tax me under their rules; I did consult with a tax advisor there, and went through the possibilities. Won't work for me.
So, back to my Portuguese tax advisor; without annual taxation documentation from the Dutch, I need to file here. NO personal allowance, NO credits, nada. Taxed at a flat rate, I think it's 23%.
For our modest income, the annual bill is terrible.
No, it's not regular income, it's a specific catagory, residential rental income.
It changes all the time; a few years ago it was regular income and the tax we paid was reasonable. Well, fair at least.
After your initial 5 years of residency, you'll need to show your financial statements; and it'd better look good if you want to have the option to stay.
There isn't much use in consulting an English tax advisor; you already know what you pay there. you need to consult with a Portuguese tax advisor who understands the dual taxation treaties. Then you'll know.
Make an appointment with Dennis Swing Green at Eurofinesco. This is his thing.
As it is NOT taxed, Portuguese tax law applies; no, I have no options or get outs. The only possibility in my case is to get the Dutch to tax me under their rules; I did consult with a tax advisor there, and went through the possibilities. Won't work for me.
So, back to my Portuguese tax advisor; without annual taxation documentation from the Dutch, I need to file here. NO personal allowance, NO credits, nada. Taxed at a flat rate, I think it's 23%.
For our modest income, the annual bill is terrible.
No, it's not regular income, it's a specific catagory, residential rental income.
It changes all the time; a few years ago it was regular income and the tax we paid was reasonable. Well, fair at least.
After your initial 5 years of residency, you'll need to show your financial statements; and it'd better look good if you want to have the option to stay.
There isn't much use in consulting an English tax advisor; you already know what you pay there. you need to consult with a Portuguese tax advisor who understands the dual taxation treaties. Then you'll know.
Make an appointment with Dennis Swing Green at Eurofinesco. This is his thing.
Apr 8th 2017, 1:29 pm
#55
Polished expat
Joined: Jul 2014
Location: Arcos de Valdevez "Onde Portugal se fez"
Posts: 16,831
Re: Moving to portugal and Brexit...
It might be worthwhile you double-checking that information liveaboard. If a PT resident owns and lets out residential property in Portugal, he can most certainly get it taxed either at the flat rate or at the progressive rates. Which is more beneficial would depend on the amount of the income and how it is divided and declared if you're a couple. Maybe it's different for foreign property but could be worth checking anyway just to make sure.
That's from this very good intro to the tax system which I've just come across in English
Investor's Guide - Fiscal System - Main Taxes in Portugal
Rental income is subject to withholding tax at the rate of 25%, provided the payer is an entity subject to keep statutory accounting.
Maintenance, repair expenses, municipal property tax and stamp tax may be deducted from gross rental income, if actually incurred and provided it is properly documented.
Rental income is subject to a 28% flat tax rate, but the taxpayer may opt to add the rents obtained to the respective taxable income in the tax return. If the taxpayer makes such election, the income shall be taxed at the progressive tax rates, with a credit given for the tax withheld. Rental income obtained by non-residents is taxed at a flat rate of 28%.
Maintenance, repair expenses, municipal property tax and stamp tax may be deducted from gross rental income, if actually incurred and provided it is properly documented.
Rental income is subject to a 28% flat tax rate, but the taxpayer may opt to add the rents obtained to the respective taxable income in the tax return. If the taxpayer makes such election, the income shall be taxed at the progressive tax rates, with a credit given for the tax withheld. Rental income obtained by non-residents is taxed at a flat rate of 28%.
Investor's Guide - Fiscal System - Main Taxes in Portugal
Apr 8th 2017, 6:26 pm
#56
BE Enthusiast
Joined: Feb 2008
Posts: 542
Re: Moving to portugal and Brexit...
It seems odd to me that even if I do not have to pay tax in the UK due to the allowance, I would then have to pay it in PT. So what you are saying is that if I dont have to pay any tax in the UK due to the 11k allowance, I will have to pay full PT tax on that income, taking in to account whatever the PT tax allowance it? (what is the portugal tax allowance?) That would be very annoying!!
When the PT tax resident completes the annual PT tax return, the full £25,000 must be declared. The tax payable to the PT tax authorities will be reduced by the euro equivalent of the £1,000 already paid to HMRC.
As liveaboard has mentioned, there are fewer expenses that can be claimed against the rental income in PT than is the case in the UK, and therefore a sizeable PT tax bill is likely to result.
With the NHR scheme, certain foreign-sourced income (including rental income) is exempt from taxation in PT if it is liable to tax in the country of source. Because UK rental income is taxed in the UK, it will be exempt from tax in PT. Liveaboard's Netherlands rental income is not liable to tax in the Netherlands, and therefore it is not exempt from tax in PT.
Therefore, if robodelfy were to be accepted on to the NHR scheme, he would pay tax on his rental income only in the UK. As others have said, the NHR scheme lasts for ten consecutive years, and exemption from tax must be claimed in each of those years via the annual PT tax return. After the ten years are up, normal PT tax rules apply.
Apr 9th 2017, 6:47 am
#57
BE Forum Addict
Joined: Jun 2012
Posts: 3,033
Re: Moving to portugal and Brexit...
When I ask professional tax consultants these questions, I get different answers than Eric or Teejaydee.
I am not in the NHR scheme.
Taxes are incredible complex; and the rules in different EU countries are not the same. That's why the dual tax treaties are all bilateral, not EU.
On top of that, they change all the time in each country, and the treaties get updated as a result.
Like I said, I was taxed as normal income; that has changed. The main difference isn't the rate, it's the lack of personal allowances and credits.
My advice is ALWAYS to make an appointment and consult a recommended tax professional.
Usually it's only a hundred euros or less, many times I wasn't asked to pay at all.
I am not in the NHR scheme.
Taxes are incredible complex; and the rules in different EU countries are not the same. That's why the dual tax treaties are all bilateral, not EU.
On top of that, they change all the time in each country, and the treaties get updated as a result.
Like I said, I was taxed as normal income; that has changed. The main difference isn't the rate, it's the lack of personal allowances and credits.
My advice is ALWAYS to make an appointment and consult a recommended tax professional.
Usually it's only a hundred euros or less, many times I wasn't asked to pay at all.
Apr 9th 2017, 7:16 am
#58
Polished expat
Joined: Jul 2014
Location: Arcos de Valdevez "Onde Portugal se fez"
Posts: 16,831
Re: Moving to portugal and Brexit...
On the matter of foreign rental income, I've just accessed the help screen behind the online tax return for 2016 (ie relative to 2015 income - I haven't got around to downloading the 2017 form for 2016 income quite yet) to see how it should be declared and what options are available (dunno why I didn't think of that before - I've been looking at simulators, which haven't been at all satisfactory in their handling of foreign-sourced income).
Anyway, it says you declare the income, nett of allowable expenditure but before any tax paid abroad. Allowable expenditure is conservation and maintenance of the building, condominium fees, local authority taxes / fees if paid by the landlord.
There's additional allowances for expenditure incurred up to 2 years previously if the property was being prepared for the purposes of letting and wasn't used for anything else during that period.
Not included are any costs associated with finances, with furniture and appliances or with decoration and comfort.
There's a separate box for the tax paid abroad.
And there's the option for englobamento, ie to have it considered as normal income, taxed at progressive rates as opposed to the 28% that otherwise applies. That would give the allowance, which was 4,104€ for that year. Plus, you'd presumably get the personal deductions from the initial calculation (eg general expenditure, health, vehicle repairs and other special categories etc, which could easily knock hundreds off that before the final figure is arrived at).
In case it's of any use to anyone, I'll put the actual text behind this spoiler as it's quite long and copying and pasting takes the nice formatting away
Anyway, it says you declare the income, nett of allowable expenditure but before any tax paid abroad. Allowable expenditure is conservation and maintenance of the building, condominium fees, local authority taxes / fees if paid by the landlord.
There's additional allowances for expenditure incurred up to 2 years previously if the property was being prepared for the purposes of letting and wasn't used for anything else during that period.
Not included are any costs associated with finances, with furniture and appliances or with decoration and comfort.
There's a separate box for the tax paid abroad.
And there's the option for englobamento, ie to have it considered as normal income, taxed at progressive rates as opposed to the 28% that otherwise applies. That would give the allowance, which was 4,104€ for that year. Plus, you'd presumably get the personal deductions from the initial calculation (eg general expenditure, health, vehicle repairs and other special categories etc, which could easily knock hundreds off that before the final figure is arrived at).
In case it's of any use to anyone, I'll put the actual text behind this spoiler as it's quite long and copying and pasting takes the nice formatting away
Spoiler:
Apr 9th 2017, 7:26 am
#59
Polished expat
Joined: Jul 2014
Location: Arcos de Valdevez "Onde Portugal se fez"
Posts: 16,831
Re: Moving to portugal and Brexit...
Just coming back to this for a moment - I was wrong.
According to information on the Finanças website, once you are granted NHR status it applies for each of the following 10 years in which you are resident but doesn't preclude it from being suspended if you cease to be resident in one or more of those years and subsequently resumed for the remainder of that original period.
My apologies for the confusion.
No, what I mean is that it applies for a maximum period of 10 years, as long as you continue to be resident during each of those years (ie each year treated separately). As far as I know (and I admit to not being certain on this), it's granted for a continuous period - so for example if you benefitted from it for 3 years, then moved to another country for 3 years, then returned to PT it would have "lapsed" because of your absence. But no, you wouldn't owe anyone anything for the time it had applied.
My apologies for the confusion.
Apr 9th 2017, 8:54 am
#60
Forum Regular
Thread Starter
Joined: Apr 2017
Posts: 40
Re: Moving to portugal and Brexit...
Thanks everyone
Teedeejay, what you wrote was teh clearest it could be put and makes sense. But it still seems people have differening ideas of how it all works!
Maybe the next step should be to speak to an advisor as you say, and just get exact information for my particular situation.
As you say, these dual tax treaties can change often, and surely Brexit will be a likely time for change?
So red eric, that is quite a bonus for the NHR scheme. If I read you correctly, you could be on the NHR scheme for 5 years, leave portugal for 10 years, come back and still have 5 years on the NHR scheme....if it still exists!
Teedeejay, what you wrote was teh clearest it could be put and makes sense. But it still seems people have differening ideas of how it all works!
Maybe the next step should be to speak to an advisor as you say, and just get exact information for my particular situation.
As you say, these dual tax treaties can change often, and surely Brexit will be a likely time for change?
So red eric, that is quite a bonus for the NHR scheme. If I read you correctly, you could be on the NHR scheme for 5 years, leave portugal for 10 years, come back and still have 5 years on the NHR scheme....if it still exists!